China has announced its decision to impose provisional anti-dumping tariffs on European brandy imports, a move that escalates an ongoing trade conflict between the country and the European Union (EU). This decision follows the EU’s imposition of tariffs ranging from 7.8% to 35.3% on Chinese electric vehicles (EVs), citing unfair subsidies and market distortion concerns.
The Chinese Ministry of Commerce released a statement on Tuesday, confirming that the tariffs on EU brandy will be introduced in the form of cash deposits. These deposits will range from 30.6% to 39% and will be applied starting Friday. The decision, according to the ministry, is based on preliminary findings from an anti-dumping investigation into European brandy imports initiated in accordance with both Chinese law and World Trade Organization (WTO) guidelines.
The Chinese ministry’s statement marks a significant turning point in the trade dispute, underscoring that its decision was made after an extensive investigation. The ministry said the preliminary results showed that European brandy imports were being sold at below-market prices, harming China’s domestic liquor industry.
“China has already tried all methods to avoid a tariff war with the EU,” a Zhejiang-based columnist wrote in response to the tariff decision. “Since the EU fired the first shot at us, it’s time to see how we can effectively fight back.”
The imposition of tariffs on brandy is widely seen as a retaliation for the European Union’s earlier decision to impose tariffs on Chinese electric vehicles. The EU, led by countries like France and Italy, justified the EV tariffs by claiming that Chinese automakers were benefiting from unfair subsidies, which allowed them to undercut European competitors in the EV market. This action followed a thorough investigation initiated by the European Commission and culminated in a contentious vote among EU member states.
The European Commission’s EV tariffs, which range between 7.8% and 35.3%, are set to apply to all Chinese-manufactured electric vehicles imported into the bloc. These tariffs are part of the EU’s broader strategy to protect its own auto industry, which has been struggling to compete with China’s low-cost electric vehicle manufacturers. Notably, European automotive giants such as Volkswagen and Stellantis have faced increasing pressure from Chinese brands that are rapidly gaining market share within the continent.
The vote on the EV tariffs was divisive, with 10 EU member states, including France, Italy, and Poland, voting in favor of the tariffs, while 5, including Germany and Hungary, voted against. Twelve countries, including Spain and Sweden, abstained from voting, reflecting the broader discord within the EU over how to handle the growing presence of Chinese EVs in Europe. Germany’s vote against the tariffs was particularly significant, given the country’s strong economic ties to China and the importance of its automotive sector.
Hildegard Müller, president of the German Association of the Automotive Industry (VDA), criticized the tariffs, stating that they represented a step backward for global trade cooperation. Müller called for continued dialogue between the EU and China, warning that escalating the dispute could result in further economic damage for both sides.
“Global trade needs cooperation, not confrontation,” Müller said. “These tariffs undermine the principle of fair competition and risk harming Europe’s own industries.”
China’s retaliation, while focusing initially on brandy, could expand to a wider range of European products, particularly from France. French cognac brands such as Hennessy and Rémy Martin, which have a significant presence in the Chinese market, are expected to feel the immediate impact of the new tariffs. In 2023, France exported 61.5 million bottles of cognac to China, making it one of the largest markets for the French liquor industry.
The Bureau National Interprofessionnel du Cognac (BNIC), France’s governing body for cognac production, expressed concerns over the new tariffs. A spokesperson for the BNIC stated that France would work closely with the EU to challenge the Chinese tariffs at the WTO level, signaling that this could be the beginning of a protracted legal battle in the global trade arena.
“China’s tariffs on brandy are a clear act of retaliation,” the spokesperson said. “We will take action at the World Trade Organization to ensure that the interests of French producers are protected.”
Meanwhile, Chinese commentators and analysts have pointed out that brandy is only the first step in what could become a broader retaliatory effort. Some voices within China’s political and economic circles have called for additional tariffs on French goods, including luxury items such as handbags, perfumes, clothing, and jewelry. There have also been suggestions that China could target other sectors of French exports, such as aircraft, wine, and dairy products.
A Jiangsu-based columnist known by the pseudonym “Jianshiyijin” commented that China should focus its retaliation on France, as the country played a pivotal role in the EU’s decision to impose tariffs on Chinese EVs.
“France’s luxury products should also be targeted,” the columnist wrote. “It is better to cut off one finger of an enemy than to hurt all ten of his fingers while leaving them attached. France must pay a heavy price for its actions.”
Although Germany voted against the EV tariffs, it too may face repercussions from China’s retaliatory measures. The Chinese Ministry of Commerce has indicated that it is considering imposing tariffs on European cars with large engines, specifically targeting vehicles with an engine displacement of 3,000 cubic centimeters (three liters) or greater. This measure would primarily affect German automakers such as Mercedes-Benz, BMW, and Porsche, which produce high-performance vehicles in this category.
Should China proceed with these additional tariffs, it could significantly impact Germany’s auto exports, which have already faced challenges due to the global shift towards electric vehicles and the economic slowdown in key markets.
Observers have noted that China’s potential tariff on European cars with large engines would be a strategic response, as it targets a high-value sector of European exports. By imposing tariffs on luxury vehicles, China could inflict economic damage while also responding proportionately to the EU’s tariffs on Chinese EVs, without escalating the dispute beyond manageable levels.
In addition to brandy, China is also conducting investigations into potential dumping of pork and dairy products from the EU. The Ministry of Commerce has stated that these investigations are still in progress, and any decisions on tariffs will be made once the findings are finalized. European agricultural products, particularly from countries like France, have long enjoyed a strong presence in the Chinese market, and further tariffs on these goods could widen the scope of the trade dispute.
Analysts have warned that the deepening trade tensions between China and the EU could have far-reaching consequences for both economies, as well as for global trade more broadly. While the initial focus of the conflict is on the automotive and alcohol industries, the dispute could easily spill over into other sectors, particularly if both sides escalate their retaliatory measures.
Despite the escalating tensions, there are still calls for dialogue and negotiation from various quarters. Many stakeholders, particularly within the business communities of both Europe and China, have urged their governments to avoid a full-scale trade war. Hildegard Müller of the VDA emphasized the need for the EU and China to work together to resolve their differences.
“It is in the interest of both Europe and China to avoid a protracted trade conflict,” Müller said. “We must focus on finding solutions that promote fair competition and benefit both sides.”
However, as both sides harden their positions, the possibility of a negotiated solution appears increasingly remote. With both the EU and China appearing determined to defend their respective industries, the coming months could see further escalation in the form of additional tariffs and trade barriers.
